The US will burn and produce more coal this year than in 2016, the Energy Information Administration said Tuesday.

In its first Short-Term Energy Outlook of the year, the EIA estimates electric power sector coal consumption will increase by 6%, or 41 million st, year over year to 720 million st on higher natural gas prices and increased electricity generation.

The agency said the Henry Hub natural gas spot price should average $3.55/MMBtu in 2017, up more than $1 from $2.51/MMBtu in 2016. Consumption is estimated to have fallen 8%, or 60 million st, in 2016 to 678.7 million st.

RECORD PRODUCTION DROP

US coal production for 2016 fell 18%, or 158 million st, year on year to 739 million st, the EIA estimates, marking the lowest level of production since 1978. Such a drop in output would be the largest annual decline ever in both tons and percentage based on data going back to 1949.

Production is predicted to bounce back 7% this year to 790 million st with gains across all US regions. Production in the Western Region, which includes the Powder River Basin, is estimated to increase 8% to 454 million st; production in the Interior Region, which includes the Illinois Basin, is estimated to increase 7.7% to 161 million st; and production in the Appalachian Region is estimated to increase 4% to 190 million st.

 

In 2018, nationwide production is expected to increase only 2 million st with gains only seen in the Western Region, as production rises 3.4% to 454 million st.

COAL TO GAIN ON GAS

Increased utility burn this year will lead to coal accounting for a greater share of generation, the EIA said, with coal and gas each making up about 32% of the fuel mix. In 2018, the EIA said gas will pull slightly ahead with a 33% share of generation compared to coal at 32%.

 

The agency predicts last year gas, for the first time, provided the largest share of electricity generation on an annual basis, making up 34% of the mix compared to 30% from coal.Utility coal stockpiles were estimated at 163 million st at the end of October, up 3% from the prior month but down 7% from the year-ago month. Inventories were estimated at 170 million st at the end of 2016, slightly higher than the 10-year average of 167 million st.